If the prospect of losing a few months' income isn't an option, go for disability insurance. / Thinkstock

by By Jeff Reeves, Special for USA TODAY

by By Jeff Reeves, Special for USA TODAY

Americans use insurance to protect a host of assets, from cars to homes to jewelry. But many people forget to insure their most important asset - the ability to work and earn a living.

As a recent Social Security fact sheet states, "Just over 1 in 4 of today's 20 year-olds will become disabled before reaching age 67." And if disease or injury renders you disabled early in your working life, the lost wages can be worth much more than a house or a sedan.

Do the math: If you make $50,000, 20 years' labor pays $1 million.

The good news is that if you don't have insurance and get hurt or ill, you aren't doomed. The Social Security Administration provides some form of disability benefits as a safety net.

But it's hardly enough to live comfortably. As of March 2013, the average disability payment was less than $1,130 per month. Furthermore, there is a complex eligibility process, and benefits apply to Americans with a medical condition that prevents them from working for at least 12 months.

For many families, the prospect of losing just a few months' income or living on half the paycheck just isn't an option. If this sounds like you, it may make sense to seek out some form of disability insurance to protect yourself.

Here are your options if you're looking at disability insurance:

â?¢ Group Disability Plans. The most common kind of disability insurance, group plans are typically offered through your employer. The lowest tier of group coverage is extremely affordable, so that's a big plus, but benefits vary greatly. Consider that group plans typically don't come close to replacing your full paycheck, with a reimbursement rate of about 60% being typical. Furthermore, group plans often place a monthly or yearly cap on the dollar amount you can be paid, or set a maximum time frame for benefits that could be as little as two years. Because of these drawbacks, it's important to read the fine print on group plans because they may not help much if illness strikes.

â?¢ Individual Disability Plans. If your employer doesn't offer a group plan or you don't like what you're offered at the office, you can shop around as an individual. But keep in mind that, without a group, your price is based on your unique situation and needs. Like health insurance, that means individual plans are generally cheaper if you're young and healthy and costly if you're old with heart trouble. But even so, shopping as an individual opens a wealth of options - such as coverage for lost bonus income above your salary, or portability to keep the disability coverage even if you change jobs. If you have unique needs and are willing to shop around, an individual plan is worth pursuing.

â?¢ Supplemental Disability Plans. If you have a basic employer-sponsored disability plan or if you're content to rely on Social Security for any long-term disability claim, then supplemental disability coverage is a decent and affordable bridge. As the name implies, it is an additional layer of coverage to help pay for medical or living expenses that may not be covered by a long-term plan. For instance, if you have an employer-sponsored group plan that pays just 60% of your paycheck, for a modest monthly fee you may be able to add on a supplemental policy to bring that amount up to 80%.

The bottom line is that, with any financial product, your personal needs will dictate what kind of coverage is best for you. The government will provide a basic safety net should tragedy strike, and obviously some disability coverage is better than none.

However, don't fool yourself into thinking that just because you're covered that you will be able to pay all your bills should a medical emergency strike.

So start with your employer and read the fine print on the disability coverage it offers, if any. Then consider whether you can get by on those terms or whether it's worth pursuing individual or supplemental coverage.

After all, the worst time to read the fine print on your disability coverage is when you need it. Be proactive and plan ahead.

IMPORTANT DISABILITY OPTIONS TO KNOW

When you're digging into your disability insurance options, it's important to look at the following areas to ensure you have the best coverage for your unique situation:

â?¢ Non-Cancelable and Guaranteed Renewable Policy. Most reputable insurers offer policies that cannot be canceled and are automatically renewed as long as you pay your premium on time. But obviously, you should always check for this language because it is crucial to any good disability insurance.

â?¢ Elimination Periods and Waiting Periods. The amount of time you have to wait for your first disability check and the maximum length of benefits is important to know. Not only does it dictate terms of your reimbursement, but these periods also dictate price. For instance, if you have enough sick time and savings to wait 120 days before your first disability check, you will pay a lower rate than someone who can manage only 60 days before their first payout. Like choosing a larger deductible on your car insurance, extending your waiting period can save you a bundle on premiums over time.

â?¢ Own Occupation Coverage. Disability insurance labeled "own occupation" applies to your current occupation and the ability to perform it. This is crucial to know because cheaper forms of disability insurance may require you to take any job you are physically able to perform â?¦ even if it pays a fraction of your former pay or forces you to take a step back in your career.

â?¢ Future Purchase Options. For a slightly higher rate, a policy with a future purchase option allows you to increase coverage as you wages rise - without taking another physical or rewriting the whole policy. This flexible option to a disability policy is useful to those who are climbing the corporate ladder or change jobs frequently.

â?¢ Business Overhead Expense Coverage. If you own your own business or incur significant business expenses that don't come out of your regular paycheck, you may want to insure against overhead charges as well as lost income. Without this kind of policy you may see your paycheck protected but lose your business as office with rent, utilities or other expenses pile up. Typically, anything that is tax deductible under business expenses will be covered by overhead insurance.

â?¢ Cost of Living Adjustments. If you're disabled for five years or more, it may be difficult to keep up with the bills if your payout is fixed but your expenses keep rising. Check any long-term plan to see whether payments are indexed to inflation in the event of a claim.

â?¢ Retirement Protection. Most disability policies sunset when you are at retirement age. But where does that leave you if you're currently way behind on your retirement savings? If you're late to retirement planning, then you may want to look at a rider in your disability insurance that will contribute to retirement savings as well as pick up your living expenses.

â?¢ Lifetime Benefits. If you don't have retirement savings, another option is to pay extra for lifetime benefits that do not expire at age 65 or so. Of course, you'll pay extra for this - a few percentage points if you're young and healthy, but sometimes 20% or more if you're older.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor's Guide to Finding Great Stocks.